Even after the short-lived correction in February, the market continues to reach dizzying new heights. That makes it particularly tough to find any real bargains, especially for value investors. Using a variety of metrics, the market looks expensive, and that will likely continue. But while it may be difficult, it isn’t impossible to find compelling buys for those willing to search high and low for the right opportunities.
To lend a hand, we asked three Motley Fool investors to choose top companies they believe provide great values today. They offered convincing arguments for Apple Inc. (NASDAQ:AAPL), Ford Motor Company (NYSE:F), and Oshkosh Corporation (NYSE:OSK).
If it’s good enough for Buffett…
Danny Vena (Apple): Apple may currently have the world’s largest market cap, but the Cupertino tech giant gets very little love when it comes to valuation. Its P/E ratio of just 18 is significantly lower than the multiple of 25 enjoyed by the S&P 500.
If you have any doubts as to the company’s worth, however, look no further than the Oracle of Omaha himself. Legendary investor Warren Buffett has been increasing Berkshire Hathaway’s (NYSE:BRK-A) (NYSE:BRK-B) position in the iPhone maker, adding 31 million shares in the fourth quarter of 2017, bringing its total stake to 165.3 million shares. The recent buying spree made Apple Berkshire’s second-largest holding as of Dec. 31 — worth over $28 billion.
Buffett has provided recent insight into why he values Apple so highly. “Apple has an extraordinary consumer franchise,” he said in an interview. “I see how strong that ecosystem is, to an extraordinary degree… You are very, very, very locked in, at least psychologically and mentally, to the product you are using. [The iPhone] is a very sticky product.”
While investors are rightly concerned about the slowing growth of the iPhone, Apple is working to reduce its reliance on the flagship product. The company believes it can double its services business to $50 billion by 2020, while also touting the strength of its wearables business. The Apple Watch, AirPods, and Beat headphones combined to produce sales that grew by 70%, helping push revenue from Apple’s “other products” segment to $5.5 billion in its most recent quarter.
Don’t forget the dividend, which currently yields about 1.4%, has a lower-than-average 26% payout ratio. Apple has historically revealed increases to its capital return policy in conjunction with its fiscal second-quarter financial release in early May, and many believe the payout will increase again this year.
Investors looking for solid value and the potential for continued growth should take a bite of Apple.
Juicy dividend yield
Daniel Miller (Ford Motor Company): If you’re looking for value stocks in March, look no further than Detroit’s second-largest automaker, Ford. It’s difficult to imagine more negativity could be priced into the stock as it trades at a paltry price-to-earnings ratio of 5.6 times, which has boosted its dividend yield to 5.77% — and that doesn’t even include the annual supplemental dividend.
